Publication:
The Unexpected Global Financial Crisis : Researching Its Root Cause

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dc.contributor.authorTreichel, Volker
dc.contributor.authorLin, Justin Yifu
dc.date.accessioned2012-03-19T17:28:31Z
dc.date.available2012-03-19T17:28:31Z
dc.date.issued2012-01-01
dc.description.abstractThe world is currently still struggling with the aftermath of the worst economic crisis since the Great Depression. Following a description of the eruption, evolution and consequences of the global crisis, this paper reviews alternative hypotheses for the causes of the global financial crisis as well as their empirical evidence. The paper refutes the frequently voiced view that the global crisis was caused by global imbalances that reflected economic policies of East Asian countries. Instead, it argues that global imbalances were the result of excess demand in the United States, resulting from both the public debt in the United States arising from the Afghanistan and Iraqi wars and tax cuts and the overconsumption by households supported by the wealth effect from the housing bubble in the United States. The housing bubble itself was the outcome of the Federal Reserve's low interest rate policy in the aftermath of the burst of the "dot-com" bubble in 2001, the lack of appropriate financial regulation, and housing policies aimed at expanding the mortgage market to low-income borrowers. It was possible to maintain the large trade deficits of the United States for such a long period of time because of the dollar's reserve currency status. When the housing bubble in the United States burst, the global crisis ensued. The paper also analyzes why China's trade surplus increased significantly in general and with the United States in particular in recent years, and argues that this increase was caused by both the relocation of the labor-intensive tradable sector of East Asian economies to China and high corporate saving rates in China as a result of its dual-track approach to reform.en
dc.identifierhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120109085942
dc.identifier.doi10.1596/1813-9450-5937
dc.identifier.urihttps://hdl.handle.net/10986/3222
dc.languageEnglish
dc.relation.ispartofseriesPolicy Research working paper ; no. WPS 5937
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectASSET MANAGER
dc.subjectASSET PRICE
dc.subjectASSET PRICES
dc.subjectASSET-LIABILITY MISMATCH
dc.subjectBAILOUT
dc.subjectBALANCE OF PAYMENTS
dc.subjectBALANCE OF PAYMENTS CRISES
dc.subjectBALANCE OF PAYMENTS CRISIS
dc.subjectBALANCE SHEET
dc.subjectBANK LENDING
dc.subjectBANKING INSTITUTIONS
dc.subjectBANKING SYSTEM
dc.subjectBANKRUPTCY
dc.subjectBORROWER
dc.subjectBORROWING COSTS
dc.subjectBUDGET DEFICIT
dc.subjectBUDGET SURPLUSES
dc.subjectBUSINESS CYCLE
dc.subjectBUSINESS CYCLES
dc.subjectCAPITAL ACCOUNT
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL INFLOWS
dc.subjectCAPITAL MARKETS
dc.subjectCAPITAL OUTFLOWS
dc.subjectCENTRAL BANK
dc.subjectCENTRAL BANKS
dc.subjectCOLLATERAL
dc.subjectCOMMERCIAL BANK
dc.subjectCOMMERCIAL BANKS
dc.subjectCOMMERCIAL PAPER
dc.subjectCOMMERCIAL PAPER MARKET
dc.subjectCOMMODITY PRICE
dc.subjectCOMMODITY PRICES
dc.subjectCONSUMER CREDIT
dc.subjectCONSUMER GOODS
dc.subjectCONSUMPTION EXPENDITURES
dc.subjectCORPORATE SAVING
dc.subjectCREDIT DEFAULT
dc.subjectCREDIT DEFAULT SWAPS
dc.subjectCREDIT MARKET
dc.subjectCREDIT MARKETS
dc.subjectCREDITOR
dc.subjectCREDITORS
dc.subjectCURRENCY
dc.subjectCURRENT ACCOUNT DEFICIT
dc.subjectCURRENT ACCOUNT DEFICITS
dc.subjectCURRENT ACCOUNT SURPLUS
dc.subjectCURRENT ACCOUNT SURPLUSES
dc.subjectDEBT BURDENS
dc.subjectDEBT CRISIS
dc.subjectDEBT OBLIGATIONS
dc.subjectDEFAULT RISK
dc.subjectDEFAULTS
dc.subjectDEFICITS
dc.subjectDEPOSIT ACCOUNTS
dc.subjectDEPOSIT INSURANCE
dc.subjectDEPOSITS
dc.subjectDERIVATIVE
dc.subjectDERIVATIVE PRODUCTS
dc.subjectDERIVATIVES
dc.subjectDEVELOPING COUNTRIES
dc.subjectDISCLOSURE OF INFORMATION
dc.subjectDURABLE
dc.subjectDURABLE GOODS
dc.subjectECONOMIC POLICIES
dc.subjectEMERGING ECONOMIES
dc.subjectEMERGING MARKET
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectEMERGING MARKETS
dc.subjectEQUITIES
dc.subjectEQUITY FUND
dc.subjectEQUITY INVESTMENT
dc.subjectEQUITY MARKET
dc.subjectEQUITY MARKETS
dc.subjectEXCESS LIQUIDITY
dc.subjectEXCHANGE COMMISSION
dc.subjectEXCHANGE RATE
dc.subjectEXPORT COMPETITIVENESS
dc.subjectEXPORT SHARE
dc.subjectEXPORTERS
dc.subjectFEDERAL RESERVE
dc.subjectFEDERAL RESERVE BANK
dc.subjectFINANCIAL ASSETS
dc.subjectFINANCIAL CRISIS
dc.subjectFINANCIAL DISTRESS
dc.subjectFINANCIAL FLOWS
dc.subjectFINANCIAL INSTITUTIONS
dc.subjectFINANCIAL INSTRUMENT
dc.subjectFINANCIAL INSTRUMENTS
dc.subjectFINANCIAL MARKET
dc.subjectFINANCIAL MARKETS
dc.subjectFINANCIAL SYSTEM
dc.subjectFISCAL DEFICITS
dc.subjectFISCAL POLICIES
dc.subjectFISCAL POLICY
dc.subjectFIXED INCOME
dc.subjectFOREIGN CURRENCY
dc.subjectFOREIGN DIRECT INVESTMENT
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE RESERVES
dc.subjectGLOBAL CAPITAL
dc.subjectGLOBAL CAPITAL MARKETS
dc.subjectGLOBAL ECONOMY
dc.subjectGLOBAL TRADE
dc.subjectGLOBALIZATION
dc.subjectGOVERNMENT BUDGET
dc.subjectGOVERNMENT POLICY
dc.subjectHEDGE FUND
dc.subjectHEDGE FUNDS
dc.subjectHOME EQUITY
dc.subjectHOME EQUITY LOAN
dc.subjectHOME EQUITY LOANS
dc.subjectHOME LOAN
dc.subjectHOME MORTGAGE
dc.subjectHOUSEHOLD INCOME
dc.subjectHOUSEHOLD WEALTH
dc.subjectINCOME INSTRUMENTS
dc.subjectINFLATION
dc.subjectINFLATIONARY EXPECTATIONS
dc.subjectINFLATIONARY PRESSURES
dc.subjectINSURANCE
dc.subjectINSURANCE COMPANIES
dc.subjectINSURANCE COMPANY
dc.subjectINSURANCE CORPORATION
dc.subjectINTEREST PAYMENTS
dc.subjectINTEREST RATE
dc.subjectINTEREST RATE POLICY
dc.subjectINTEREST RATES
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL BORROWING
dc.subjectINTERNATIONAL ECONOMICS
dc.subjectINTERNATIONAL FINANCIAL STATISTICS
dc.subjectINTERNATIONAL MARKETS
dc.subjectINTERNATIONAL SETTLEMENTS
dc.subjectINTERNATIONAL TRADE
dc.subjectINVESTMENT BANKS
dc.subjectINVESTMENT PORTFOLIO
dc.subjectINVESTMENT RATE
dc.subjectLACK OF TRANSPARENCY
dc.subjectLENDERS
dc.subjectLETTERS OF CREDIT
dc.subjectLEVEL OF DEBT
dc.subjectLEVEL OF RISK
dc.subjectLIABILITY
dc.subjectLIEN
dc.subjectLIENS
dc.subjectLIQUIDATION
dc.subjectLIQUIDITY
dc.subjectLIQUIDITY CRISIS
dc.subjectLOAN
dc.subjectLOAN OBLIGATIONS
dc.subjectLONG-TERM INTEREST
dc.subjectLONG-TERM INTEREST RATES
dc.subjectLONG-TERM MATURITY
dc.subjectMACROECONOMIC MANAGEMENT
dc.subjectMACROECONOMIC POLICIES
dc.subjectMARKET CONFIDENCE
dc.subjectMARKET DISTORTIONS
dc.subjectMARKET INDICES
dc.subjectMARKET PARTICIPANTS
dc.subjectMARKET STABILITY
dc.subjectMATURITY
dc.subjectMICRO-DATA
dc.subjectMONETARY AUTHORITIES
dc.subjectMONETARY FUND
dc.subjectMONETARY POLICY
dc.subjectMONEY MARKET
dc.subjectMONEY MARKETS
dc.subjectMORTGAGE
dc.subjectMORTGAGE LOANS
dc.subjectMORTGAGE MARKET
dc.subjectMORTGAGE OBLIGATIONS
dc.subjectMORTGAGE-BACKED SECURITIES
dc.subjectMORTGAGES
dc.subjectMUTUAL FUNDS
dc.subjectNATIONAL SAVINGS
dc.subjectOIL PRICES
dc.subjectPENSION
dc.subjectPENSION FUNDS
dc.subjectPERSONAL INCOME
dc.subjectPOLICY RESPONSE
dc.subjectPRICE MOVEMENTS
dc.subjectPRIVATE EQUITY
dc.subjectPUBLIC DEBT
dc.subjectPUBLIC DEBTS
dc.subjectPUBLIC FINANCES
dc.subjectPURCHASING POWER
dc.subjectREAL EXCHANGE RATE
dc.subjectREAL INTEREST
dc.subjectREAL INTEREST RATES
dc.subjectREMITTANCES
dc.subjectREPAYMENTS
dc.subjectRESERVES
dc.subjectRESIDENTIAL MORTGAGE
dc.subjectRETURN
dc.subjectRISK AVERSION
dc.subjectRISK OF DEFAULT
dc.subjectRISK PROFILE
dc.subjectRISKY ASSETS
dc.subjectSAVINGS RATE
dc.subjectSAVINGS RATES
dc.subjectSECURITIES
dc.subjectSHAREHOLDERS
dc.subjectSHORT-TERM DEBT
dc.subjectSHORT-TERM DEPOSIT
dc.subjectSOVEREIGN DEBT
dc.subjectSTOCK MARKET
dc.subjectSTOCK MARKET PRICES
dc.subjectSTOCK MARKETS
dc.subjectSTOCKS
dc.subjectSWAP
dc.subjectTAX
dc.subjectTRADE BALANCE
dc.subjectTRADING
dc.subjectTRANCHES
dc.subjectTRANSACTION
dc.subjectTREASURIES
dc.subjectTREASURY
dc.subjectTREASURY BILL
dc.subjectTREASURY BILLS
dc.subjectTREASURY BONDS
dc.subjectVALUATION
dc.subjectWEALTH EFFECT
dc.subjectWEALTH EFFECTS
dc.titleThe Unexpected Global Financial Crisis : Researching Its Root Causeen
dspace.entity.typePublication
okr.crossref.titleThe Unexpected Global Financial Crisis: Researching Its Root Cause
okr.date.doiregistration2025-04-10T11:04:47.811884Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20120109085942
okr.guid195851468159322463
okr.identifier.doi10.1596/1813-9450-5937
okr.identifier.externaldocumentum000158349_20120109085942
okr.identifier.internaldocumentum15615911
okr.identifier.reportWPS5937
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2012/01/09/000158349_20120109085942/Rendered/PDF/WPS5937.pdfen
okr.region.administrativeThe World Region
okr.region.administrativeThe World Region
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isAuthorOfPublication6f9860c3-5c17-54f1-92fb-9f5055cc0038
relation.isAuthorOfPublication.latestForDiscovery6f9860c3-5c17-54f1-92fb-9f5055cc0038
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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